Q&A Employer Compliance Guide: Can Employees Transfer Commuter Funds or Drop Voluntary Coverage Mid-Year? February’s Top Compliance Questions Answered

2.5.26  |  QUALIFYING EVENT CLARIFICATION

Q. An employee and his spouse are under age 26 and covered by their respective parents’ health plans. His wife’s father will be leaving his job soon and the wife will lose coverage. Is this a qualifying event for both the employee and his wife to enroll in the employee’s group plan, or is it a qualifying event for only the wife, who would need to look for an individual plan?
A. The law permits the employee to enroll in his employer’s plan in this case due to his wife losing coverage under another employer’s group health plan.  This would be a qualifying life event for the employee, and the employee is entitled to enroll himself and any dependents (including his spouse) in his employer’s plan as a result of the wife’s loss of coverage.

2.12.26  |  COMPANY OWNER PARTICIPATION IN HRA

Q. Our client is an S Corporation, located in Massachusetts, with 15 employees and is fully insured. They offer an HRA to cover half of the member medical deductible. Can the two owners participate in the HRA?
A. No, 2% or more shareholders in an S corporation cannot participate in an HRA. Any reimbursements to the owners will be considered taxable compensation.

2.19.26  |  DROPPING VOLUNTARY ELECTIONS

Q. Can an employee cancel their voluntary life or voluntary critical illness coverage outside of open enrollment and without a qualifying life event if these benefits are post-tax?
A. If the elections are made post-tax, they do not have to comply with the Qualifying Life Event rules that apply to pre-tax elections. So if the plan allows an employee to drop coverage at any time, and the employer allows this flexibility, there is no concern with employees dropping after-tax coverages without a Qualifying Life Event.

2.26.26  |  TRANSFERRING COMMUTER BENEFIT FUNDS

Q. Can an employer allow an employee to transfer their parking funds to their transit funds under the employer’s commuter benefit plan?
A. As long as the transfers don’t cause an employee to exceed the maximum contribution for commuter benefits, and the transfer is permitted by the commuter plan documents, this is allowable. In 2020, the IRS explicitly approved this type of transfer.

Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.